Problem
Booga Limited is a reputable manufacturer within the toy industry. The company has recently been involved in a drive to supply toys to underprivileged children.
Booga was awarded a government grant of R600 000 and deposited the cash cheque into its bank account on the same date it was received (1 March 2020). An excerpt from the letter confirming the granting of the award is presented below.
Dear Sirs We have pleasure in presenting you with the attached cheque in the amount of R600 000, all conditions for the grant having been met. This amount is to be used follows:
• R360 000 may be used to acquire the extra machine required
• R240 000 is to assist with the general cash flows related to production.
We wish you the best with your future toy drives and know the children you help are grateful. Sincerely Joyce Booga immediately purchased the machine at a cost of R1 080 000. The machine has a useful life of 3 years and at the end of its useful life, Booga expects to sell if for R60 000 as scrap metal. The straightline smethod of depreciation is appropriate.
Prepare the journal entries in the books of Booga Limited for the years ended 28th February 2020, 28th February 2021 and 28th February 2022.